Oil trades near US$45 as US keeps pumping in oversupplied market
LONDON: Oil traded near US$45 a barrel following a fourth weekly loss as US drillers continued to add rigs, blunting Opec-led efforts to rebalance an oversupplied market.
Futures rose 0.4% yesterday in New York after capping the longest run of weekly declines since August 2015. US drillers targeting crude added rigs for a 22nd straight week, the longest stretch in three decades, according to data Friday from Baker Hughes Inc.
Demand will rise during the third quarter, United Arab Emirates Energy Minister Suhail Mohammed Al Mazrouei said.
Oil slumped to the lowest close in seven months on Thursday amid concerns that rising US supplies will offset output cuts by the Organisation of the Petroleum Exporting Countries and allies including Russia.
Opec and its partners have curtailed production in an attempt to reduce bloated oil stockpiles to the five-year average, but increasing numbers of rigs in America, as well as rising output in Libya, is putting that target in jeopardy.
“The number of oil rigs continued to rise last week and the market needs to see at what oil price will we not have further rig activation in the US,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “There seems to be very low conviction in the market that there really will be any inventory drawdown in the second half of the year.”
West Texas Intermediate for July delivery, which expires Tuesday, was at US$44.92 a barrel on the New York Mercantile Exchange, up 18 cents, at 12:32 pm London time. Total volume traded was about 10% below the 100day average. The contract gained 28 cents to US$44.74 on Friday.
Brent for August settlement advanced 23 cents to US$47.60 a barrel on the Londonbased ICE Futures Europe exchange, after dropping 1.6% last week. The global benchmark crude traded at a premium of US$2.45 to August WTI.
US drillers increased the rig count by six to 747 last week, the highest level since April 2015, according to Baker Hughes. American crude production has expanded to 9.33 million barrels a day, Energy Information Administration data show.
Libya’s oil production has risen to about 900,000 barrels a day after some fields restarted and the country’s biggest deposit, Sharara, increased output, according to a person with knowledge of the matter. Libya, exempt from the Opec deal, plans to boost output to the highest since 2013 by the end of July.
Supply cuts need more time to have an impact on the market, Al Mazrouei told reporters in Dubai. Saudi Energy Minister Khalid Al-Falih made a similar comment in Saudi newspaper Asharq al-Awsat.